Here are 7 reasons that you should consider to invest in mutual funds:

• Diversification- Diversification means in simple words is that the Mutual Fund has spread out your money over different companies and/or different types of assets.
• Low amount investment- You can start investing in mutual funds with an as little amount.
• Professional Management-Mutual fund analyst’s wake up each morning with one can be determination to research, analyzes, and study current and potential holdings for their mutual fund.
• Lower costs-Mutual funds are able to take advantage to reduce transaction costs.
• Systematic Investment Plans-It helps simply to invest regularly in a mutual fund with as little as Rs 100 a month. Once you register your bank account with an online platform, just set up a SIP with any amount you are comfortable with on any date of the month in a Mutual Fund of your choice. The money is automatically debited a day or two before that day every month and invested in that scheme regularized. So you become a regular investor.
• Transparency-Everything is transparent here you can see what your fund manager is doing.
• Liquidity-Because your money is spread across so many stocks and bonds, you can sell your mutual funds at any time to meet your financial needs. The money hits your bank account within 2 working days. There are Mutual Funds that do this even faster called Instant Redemption Funds. Your money comes back into your bank account within 60 seconds of selling an Instant Redemption Fund.

The sponsor is the promoter of the mutual fund. The sponsor brings in capital and creates a mutual fund trust and sets up the AMC.

The main role of a trustee is to ensure that the interest of the unit holders is protected while making sure that the mutual fund complies with all the regulations of SEBI.

An asset management company (AMC) is a firm that invests pooled funds from clients.

Here are points of the investment risk that affects mutual funds.
Market Risk-If markets fluctuate, there is always a possibility that the mutual funds you hold might be caught in a decline.
Inflation risk-The risk of losing purchasing power.
Interest rate risk-The risks that rising interest rates will cause your mutual funds to decline in value.
Credit risk-The risk that the issuer of a bond or other security won't have enough money to make its interest payments or to redeem the bonds for face value when they are due. Securities with a higher risk of default tend to pay higher returns.

1. Investment without financial goals
2. Investment without a budget
3. Investments in too many funds
4. Not paying due consideration to debt funds
5. Investment with a short-term approach

Net asset value represents funds per unit market value. This is the price at which investors buy fund units from a fund company or sell it back to the fund house.

A closed-end fund has a fixed number of shares offered by an investment company through an initial public offering. End funds which most of us think of when we think mutual funds are offered through a fund company that sells shares directly to investors.

Advanced Portfolio Management-When you buy a mutual fund, you pay a management fee as part of your expense ratio, which is used to hire a professional portfolio manager who buys and sells stocks, bonds, etc

Dividend Reinvestment-Cash is not paid out to the investor when dividends are paid on the stocks in the fund. Instead, cash is automatically used by the fund's administrators to buy more fund units on behalf of the investors and transfer them to individual investors' accounts.

Risk Reduction-Reduced portfolio risk is achieved through the use of diversification, as most mutual funds will invest in anywhere from 50 to 200 different securities—depending on the focus.

Convenience and Fair Pricing-Mutual funds are easy to buy and easy to understand and they are traded only once per day at the closing net asset value.